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Monday, 8 October 1984
Page: 1428


Senator WALSH (Minister for Resources and Energy)(9.38) —I have not heard all the debate on this legislation, indeed I have heard a fairly small fraction of it, but if the most recent contribution was typical of the calibre of the debate I should be grateful for not having heard most of it. I suggest that we should program these debates so that they are held before instead of after dinner. However, a few matters raised deserve an answer. Before moving on to those I want to correct a point of fact. (Quorum formed) I was about to point out an error in an assertion made by Senator Jack Evans who, I am told, stated that sales tax is payable within 21 days of the sale of goods. That is not the case. Sales tax is payable 21 days after the close of the month in which goods are sold. Therefore, it can be payable anything up to seven weeks after the sale of goods and, on average, one would expect it would be payable in the vicinity of five weeks after the sale of goods.

Numerous Opposition speakers criticised, proposed section 8Y, clause 297 of the Taxation Laws Amendment Bill which has become known as the onus of proof provision. It ought to be noted that there is already within the Income Tax Assessment Act in section 167, known I understand as the default assessment, power to the Commissioner of Taxation to assess a tax liability where he believes that the taxpayer has attempted to default in payment of tax. The onus of proof under section 167 also resides with the taxpayer, not the Taxation Commissioner.


Senator Jessop —How long has that been in the statutes?


Senator WALSH —It has been there longer than I can remember.


Senator Jessop —Why didn't you do something about it?


Senator WALSH —I am not criticising its being there. I argue that under certain circumstances such measures are justified. I am also advised that, among other things, section 552 of the Companies Code, which was enacted in 1981 under a government which Senator Jessop supported, applies in a similar way in relation to offences concerned with share offers. In all there are about 200 laws, including the Health Insurance Act, the Customs Act and the Migration Act which contain provisions reversing the onus of proof. Proposed section 8Y in clause 297 of the major Bill before the Senate today is necessary. This was demonstrated by the recent case of Reynolds v. the Deputy Commissioner of Taxation decided on 26 September 1984. It demonstrated how people can avoid being penalised for clear breaches of the law by hiding behind a corporate veil. In that case the company had failed to remit to the Commissioner tax instalments deducted from the wages of employees. The Commissioner was unable to secure a conviction against a person who was at material times a director of the company despite existing provisions which were designed for that purpose. That case is a major reason for justifying the inclusion of that clause.

Senator Messner asked: 'What would happen if a taxpayer were to incur a penalty because of the failings or negligence of a tax agent?' The short answer to that question is that such a person would not necessarily incur a penalty because the Commissioner has discretion, under those circumstances, to assess a penalty and would carefully consider any matter put to him. It was suggested that the penalisable act or omission was caused by a failure in diligence or negligence of a tax agent. Nevertheless, one ought to observe that people should take some care in selecting their tax agent and that a tax agent who was consistently negligent in this regard would be likely to be deregistered by a tax agents board.

Senator Messner also asked how persons on whom the Commissioner has served a departure prohibition order might obtain a departure authorisation certificate. I am advised in relation to this matter that it is important to bear in mind that the Commissioner will be authorised to issue a departure prohibition order only where a person is subject to an existing unpaid tax liability and the Commissioner believes, on reasonable grounds, that it is desirable to prevent that person's departure to ensure that the liability is discharged or secured. Such persons of whom there are likely to be only a handful in any one year should not expect to be able easily to obtain a departure authorisation certificate. Nevertheless, the Commissioner will issue a certificate if satisfied that the person will depart and return to Australia within a reasonable time and that the tax liability will be discharged. Alternatively, the Commissioner needs to be satisfied as to the security being given to the person's returning to Australia or, if no security can be given, that departure should be allowed for humanitarian reasons or because it would be in the best interests of the country.

Another matter raised by, I understand, a number of honourable senators was the possibility of taxpayers being penalised for unintended or honest mistakes. People will not be penalised or prosecuted for simply making a mistake; they have not been in the past and will not be in the future. If the amendments are carefully examined it will be seen that they are directed against persons who fail or refuse to comply with a requirement of the law, who make false or misleading statements or who keep incorrect records.

Senator Messner also sought advice as to how the Commissioner of Taxation would administer the proposed extensions of the dependent spouse rebate to de facto relationships and how such de facto relationships would be determined. The Commissioner is already required to take into account the existence of a de facto relationship in his administration of the taxation laws; for example, for the purpose of the Medicare levy. I expect that the Commissioner would use similar guidelines in applying the extension of the spouse rebate to de facto spouses.

Senator Messner also raised a question about the second reading speech regarding the transfer of losses within company groups. I note that in Hansard the relevant reference is shown as 'succeeding years' and not 'preceding years'. I confirm that there is no intention to allow for the carry back of a loss. Senator Messner was apparently confused about that. I understand that prior to the introduction of the measure into the House of Representatives some copies of the speech were prepared which had a proof reading error. That probably accounts for the misunderstanding.

Senator Messner also asked about the estimated cost to revenue of the group tax provision. The cost will apply in 1985-86 and not in 1984-85, of course, because of lagged effect. The cost estimated for 1985-86 revenue is $200m. When this matter was being discussed by the Government that estimate was given and it was queried by the Government because many of us were surprised that it was so high. However, we were assured by the Australian Taxation Office that that figure continues to be its best estimate. However, it should be noted that it is very largely a deferral of revenue because companies which record a loss in one year and can take advantages of these provisions would be required to meet that liability in some subsequent years when the group as a whole had sufficient taxable profit to take account of it. It is expected that by 1989-90 the cost to the revenue will have fallen to something like $50m.


Senator Jessop —How do you work that out?


Senator WALSH —For the reason that I stated before. All of these estimates of course, are only estimates; there can be no guarantee that they are accurate. The cost to revenue in the first year is likely to be the highest of all because groups of companies which have in some corporate entities a taxation loss for that year can offset that against profits in another company within the group in that same year. But in subsequent years when the companies which had previously recorded losses move into a taxable profit situation, they cannot continue to do it, and the cost to the revenue would be bunched in the first year of the concession and would taper off from there; at least, that is expected for the first four or five years.

Also raised was the question of the uplift factor for the estimate of the provisional tax which will be collected in 1984-85. The question was raised particularly in the context of the anticipated substantial decline in farm incomes in this financial year. The farm income factor is less important than one would superficially believe because of the self-assessment provisions of the Act as it relates to primary producer provisional taxpayers, and the variations in farm income and, therefore, in a non-self-assessed adjustment in taxation paid by primary producers are likely to be extremely variable. That is modified to a substantial extent by the self-assessment of provisional tax liability by primary producers.


Senator Jessop —What is the average farm income?


Senator WALSH —I cannot say off the top of my head, but the anticipated farm income is substantially lower than it was in the previous year. However, there are three categories of provisional taxpayers-not only primary producers but persons in receipt of property income and persons in receipt of other forms of business income. Whilst it is anticipated that primary producers' income will decline substantially in 1984-85, although not necessarily their provisional tax liability because of the self-assessment provisions that I have mentioned, property income and other business income, which account for the bulk of income subject to provisional tax, are expected to grow in 1984-85 by more than 10 per cent-attributable to the general, very substantial economic growth which has taken place over the last 12 months or so.

If Opposition members think that there is some fiddling with that figure-I do not think that anyone actually made that charge-I assure them that there is not; and if they are not willing to take my assurance, I draw their attention to the fact that a 10 per cent uplift factor for provisional tax purposes was applied in the last two Budgets of the former Government, despite the clear downturn in the economy prevailing towards the end of the coalition's period in government.

I believe that those were the specific questions which were dealt with. The Government has two sets of amendments which will be moved in the Committee stage . I will be seeking leave to move the two sets of amendments en bloc, but as two sets, not one set, because they came in at different times. I understand also that the Opposition will be moving a number of amendments. The Government will oppose those amendments. I also understand that at least one amendment is to be moved by the Australian Democrats, and that will be opposed by the Government.

Question resolved in the affirmative.

Bills read a second time.